Cost-Quality Problem of Healthcare Industry
During last decade, continually rising cost of the healthcare industry has affected everybody in the country. The malpractice insurance premiums have skyrocketed, while the payments to physicians by insurance companies have continually declined. The health insurance premiums of patients have been rising steadily. The cost of drugs is increasing every year. Every HC service provider (physicians, hospitals, nursing homes, diagnostic labs etc.) is a victim of the rising cost. But it is the patient who is suffering from the rising cost and poor quality of services.
The root causes of HC industry's cost-quality problems are diverse and complex. While some problems are caused by high cost of implementing the Information Technology (IT) solutions, others are deeply embedded in the infrastructure of the U.S. healthcare industry.
Third Party Payment Related Problems
The third party (insurance companies) payment system has its merits, but it also has a number of drawbacks with the present business model utilized in the US. This system has made the HC industry an insurance-employer controlled industry rather than a market driven industry. The patient does not have the power that a customer enjoys in any market driven industry.
The employer of the patient negotiates a deal with the insurance company to select health insurance policies for its employees. Obviously, the employer looks for its own interest first, and selects the policies that are most cost effective for the employer. Since the patient (employee) does not get involved directly in the selection process, his interest is generally overlooked. Unlike a customer who has the freedom to evaluate and select a product of his choice, the patient choices are restricted.
On other side of the fence, an insurance company solely makes the decision regarding how much to pay for each medical procedure to the physician for his services. The individual physician gets no opportunity to negotiate the price with the insurance company for his services. The physician is required to sign a blanket contract, which states that he will accept whatever amount insurance company will pay him. After the physician signs the contract, the insurance companies have the authority to change the payment amounts any time.
During last decade, the payment amounts have decreased steadily. While all workers in other industries get a salary-raise every year, the physicians get a salary-cut every year. This trend is continuing with no end in sight.
Another major flaw in the system currently used in US is that all physicians receive the same amount of payment for a medical procedure irrespective of their level of experience. A fresh graduate from medical school starts his new practice, and gets paid exactly the same amount for performing a surgery as a physician with 40 years of experience. There is no provision in the payment system of insurance companies in the US to compensate a physician for his years of experience.
The roots of these problems originate from the US federal government agency—Medicare, which provides medical insurance to elderly population. Every year, the federal budget gets cut, which results in payment reduction to the physicians and other HC service providers. To make the things worst, by law, the physician cannot ask the patient to pay and makeup for the reduced payment. Since Medicare dictates its terms to the physicians, other private insurance companies follow the footsteps of Medicare, and cut the payments every year as well.
The reduction in payment to physicians (by Medicare, Medicaid and all other insurance companies), and lack of compensation for physician's experience level translates into lower quality of service to the patients. Unfortunately, majority of patients are not even aware of these problems. Since the insurance companies increase their insurance premium every year, patients expect higher quality service from the physicians. This environment results in poor physician-patient relationship.
Legal System Related Problems
The biggest legal flaw in the US healthcare industry is lack of having a cap on malpractice lawsuits, and a cap on the percentage (of pay-out) given to the attorney representing the patient. A patient can sue a physician/HC provider for almost unlimited amount even for minor issues. Since most litigation attorneys work on contingency basis, and they can keep almost the entire amount (paid by the insurance company) if the patient wins, they have strong incentive to file a lawsuit for extremely high amounts. This flaw alone has resulted in ever increasing malpractice insurance premiums of physicians.
Unfortunately, the laws are made/changed by the government body that consists of (almost) 100% attorneys. It is natural for them not to put caps on their own potential of earning millions of dollars in malpractice lawsuits.
Information Technology Related Problems
The Internet & information technologies are growing at fast speed around the world. While most other industries have adopted the latest technologies and started to harness its benefits, the HC industry (especially independently practicing physicians) has been lagging behind to adopt the state-of-the-art technology solutions. The main reasons for physicians not adopting IT solutions (currently available in the market) are the high initial cost and inefficient methods of creating Electronic Medical Records (EMRs). Majority of physicians, today, are still using basic billing software to create insurance claims, and create medical records using paper and pen, which results in high overhead cost.
Overhead Cost of Healthcare Service Providers
The methods of communication and transfer of information among independently practicing physicians, patients, HC product/service providers, and other healthcare user groups are slow and inefficient. Majority of the overhead tasks related to providing services to the patients are done manually using paper. These manually conducted operations, rising labor cost, shortage of skilled HC workers, and high turnover of employees have resulted in ever-rising overhead cost of HC services, while the quality of services to patients is deteriorating.
At present, the average overhead cost of most HC organizations is 50%. There are many factors that contribute to the higher overhead cost of HC service providers.
a) Paper Records
A basic cause of the high cost problem is the recording, storage & transfer of patient information on papers. All of these operations are very labor intensive, inefficient, and costly. To transfer information among various HC organizations (physician's office, hospital, pharmacy, diagnostic lab, and insurance company etc.), papers have to be either mailed, or faxed. By law, the HC service providers are required to keep patient records for a period of 6 years. All of these overhead operations are conducted manually, contributing to the 50% overhead cost.
b) Physician's Typing Skill
The computers have almost become a part of every business today, including medical practices. However, lacking the typing skill, majority of physicians have not been able to use them effectively. Since the physicians create patient health records, the paper remains the media of choice for majority of them. They find it convenient, efficient and cost effective to write with a pen on a paper than any other method of recording patient information.
c) Incompatible Computer Systems
Most of the HC organizations in the US, including physician's medical offices, are equipped with computers, networks and access to the Internet. These computer systems (both hardware and software) were introduced in the HC industry by different vendors during early 90s. Since the computer systems (including the Operating Systems) were evolving themselves, the IT industry was unable to create national/global standards. With the result, most of the HC organizations have computer systems that are not interoperable with each other. This incompatibility (non-interoperability) is prohibiting electronic transfer and sharing of healthcare information. Outdated medical systems software/hardware has further contributed to the incompatibility problem.
d) Isolated Healthcare Organizations
The paper records and the incompatible computer systems are the major hurdles for electronic data transfer among various HC service providers. The medical offices, even within the same building, remain isolated from each other. The manually conducted operations to transfer patient information are inefficient and labor intensive, contributing to the higher overhead cost.
With the exception of few HMOs with their own physicians and facilities, majority of the healthcare services are provided by independently practicing physicians who have small offices. These small medical offices are inter-dependent for providing healthcare services to the patients. Unless a network is created to link these small medical offices with each other, and HC information is transferred electronically, the US healthcare industry's cost-quality problem will not be solved.
e) Redundant Storage of Patient Records
Each isolated HC organization is forced to create and store its own set of patient records, mostly on papers. Thus, the same information for a patient is duplicated and stored at every HC organization. This redundant storage of patient records contributes significantly towards the high overhead cost of healthcare industry.
f) Physician to Patient Communication
Telephone is still the primary mode of communication between the patients and the medical office staff. Since physicians are busy examining the patients during office hours, a large medical office staff is needed to perform overhead tasks such as receive patient phone calls, make appointments, answering questions for patients, and take messages for physicians. Since the labor cost of medical workers is increasing every year, the overhead cost would also increase.
Paper-Based Medical Office System Work-Flow
The basic purpose of a medical office is to examine a patient, diagnose his health problem, and provide treatment. The patient examination process starts with the Primary Care physician, who provides the first level diagnosis and treatment. For simple health problems, after conducting limited diagnostic tests, the primary care physician is able to diagnose the case, and write a prescription for the appropriate medication. In a complex case, however, it requires further diagnosis. For the next level diagnosis, the patient is referred to an appropriate Specialist physician. Further tests are conducted, and treatment is provided accordingly, which may require hospitalization of the patient. For medical office visit, diagnostic testing, and providing the treatment, each healthcare service provider (physician, diagnostic lab, pharmacy, hospital, and other service providers) sends the bill to patient's insurance company. Since the patient pays part of the bill, another bill is sent to him. In some cases, patient pays his portion of the bill in the medical office before leaving the office.
The patient initiates the examination process by making a phone call to the physician's office. When the patient arrives at the medical office, he is required to fill-out a number of Registration forms (on paper), which includes his personal information, and the insurance policy related information. The registration form information is entered in the office computer by the medical staff. The medical staff also verifies patient insurance information by making a phone call to the insurance company. The physician examines the patient, and a limited number of diagnostic tests are done within the medical office. During the examination process, the physician writes notes on the patient chart (on paper). At the end of examination process, the physician writes the ICD (International Classification of Diseases) Diagnosis Codes, and the CPT (Current Procedural Terminology) Procedure codes on a pre-printed (paper) form, called the Superbill. The Patient Chart is stored in a folder and kept in a file cabinet for future reference. The office staff picks up the Superbill, and the information is entered in the billing software program of the medical office computer. A patient statement is then created by the billing software, which is given to the patient, who pays his portion of the bill and leaves the medical office. Many times, this process is completed after the patient leaves the office, and a bill is mailed to him.
After a financial transaction for the patient visit is entered in the computer, the medical office staff creates an Insurance Claim on a standard pre-printed form, called the HCFA (Health Care Financing Administration) form. This form is then mailed to the insurance company of the patient. (Many billing software programs allow submission of insurance claims electronically to a third-party, called clearinghouse, which converts the format of the electronic claim and then further submits it to the insurance company's computer.) The insurance company staff enters this information in the company's computer for further processing. Each month, the insurance company groups all the claims of the medical office, and mails one payment check to the medical office along with the description of the payment on a form called EOB (explanation of benefits). The medical staff then applies the payment to each patient's transactions, and posts the payment & the write-off amounts in his account stored in the office computer. The computer program then calculates the patient portion of the bill. This bill is printed by the medical staff, and mailed to the patient. Patient mails his payment to the medical office in the form of a check. Sometimes, the patient calls and makes the payment by his credit card. The medical staff then posts this payment to his account in the office computer.
The medical staff using paper as the media to store the information conducts the whole business process manually. Part of this information is entered in the computer for billing & accounts purposes, but papers are still needed to be stored in the medical office. By law, the medical office is required to store the patient records for a period of six years.
With the current state of the medical office business process, the overhead cost of providing healthcare services to the patients is very high, medical offices are not operating efficiently, and the quality of services to the patient is poor.
The present invention will make the current business process of a medical office more efficient, eliminate paper records, reduce the overhead cost, and improve the quality of services to the patients. This will be accomplished by automating most of the office tasks with the P2P network system software.
Marketing Cost of Healthcare Products
The HC product suppliers such as drug manufacturers have to hire highly paid marketing representatives to reach out to the physicians, educate them about the new products, and finally convince them to prescribe the new drugs to their patients. But the physicians are very busy during the day. In-between examining the patients, they have to accommodate a number of marketing representatives and listen to their brief marketing pitches. At the end of the day, it is likely that a physician may not remember which drug belongs to which representative/drug manufacturer. In many cases, the physician would even forget the name of the marketing representative.
These highly paid marketing employees have to continually struggle to get physicians' attention, and stay in front of them. The labor cost of the marketing staff is a major factor adding to the cost of HC product suppliers.
Sales Cost of Healthcare Products
The HC products, especially prescription drugs, are sold to the patients through pharmacies. The pharmacies have to add a significant mark-up (up to 300%) to the original cost of the drugs due to their own cost of sales. With the result, the patients end up paying much higher prices for the HC products.
A number of online pharmacies have popped up during last few years. But, these pharmacies are not considered reliable (and some are illegal), since the drugs are sold to the patient without recommendation/approval of his own physician.
Poor Quality of Services to Patients    1) The patient has limited choices in selecting an insurance policy, since it is the employer of the patient who makes the selection of insurance company and policies. Most patients cannot afford to buy an insurance policy as an individual, since the premiums are very high for individuals (compared to the group rates for employers).    2) The quality of services offered by physicians at Health Maintenance Organizations (HMOs) is very poor. Since the physicians are employees of the organization, or they get a flat monthly fee per patient from the insurance company, they don't have much incentive to provide better quality service. This is the root cause why most of the HMOs in the US have failed during last decade.    3) Once the employer of a patient selects an insurance company, his choices of selecting physicians are limited to those who have signed contract with the insurance company (called participating physicians). If a patient wants to get treatment from a non-participating physician, his cost is higher.    4) A patient has no means available to compare the credentials and experience of even participating physicians, as the only information provided by the insurance companies is the name, address and phone numbers of the physicians. Very few independently practicing physicians have websites where a patient could visit and get more information. Lacking this information, most patients select a physician based on the location of the medical office, or by word of mouth recommendations.    5) After receiving services, a patient does not have any means to give his feedback about the medical practice, or the physician about the quality of service, so that other patients could review his comments and make informed decisions.    6) Getting an appointment with a physician is not an easy task for the patient. He has to call during the day when medical office is open. The working patients have to call from their office to schedule an appointment. Many employers do not allow workers to do personal chores during working hours. Since most of the medical offices are very busy, a patient is put on hold for a long time. Just making an appointment can be a stressful and time-consuming task for the patient.    7) When a patient reaches a medical office for treatment, every time, he is given a set of paper forms to fill. Then he has to wait till the papers are processed before a physician can examine him. Based on a number of national level surveys, the biggest complains of patients are the waiting-time in a medical office, and repeatedly filling the paper forms.    8) A patient does not have access to his own medical records. His health related information is created by different physicians in different medical offices and hospitals, and stored locally at the HC service provider's facility. Most of this information is on papers. If a patient needs some of his information, and send a request to the medical office, it could take several days before he could receive the information.    9) By law, the HC service providers are required to keep the patient health information for 6 years. Most medical offices discard the information after 6 years to keep their maintenance costs under control. If a patient needs his information after 6 years, he is unable to obtain it.    10) Getting a referral sent to a lab or another physician's office, or a request for prescription refill from busy physicians is not an easy task for the patient. Many times, a patient has to personally go to the medical office to pick up such items.
Existing Healthcare Network Systems
(Prior Art)
The leading experts in the healthcare industry, and US government leaders including senator Hillary Clinton and President Bush have recommended a number of IT solutions to solve the complex cost-quality problems of the healthcare industry. A number of healthcare IT companies offer technology solutions to all segments of the industry. However, none of the existing and proposed solutions, including a variety of networks, are capable of providing real-time electronic communication and data transfer between patients and independently practicing physicians, and among physicians, without which the cost-quality problems will not be solved.
Medical Office LAN Network Systems
Independently practicing physicians in the US have small medical offices. A number of vendors offer IT solutions that include billing and office management software. These software products run on small Local Area Networks (LAN) within the medical office where patient data is stored on a local Server. These products are designed for manual data entry by the medical office staff, and most of the overhead tasks are performed manually. Such products are designed only for office management purposes, and don't have any capabilities for real-time electronic data transfer outside the LAN network, especially to other independent medical practices.
Web-Based Medical Network Systems
Some vendors offer IT solutions to medical offices that are web-based instead of LAN based. The billing and office management software application and patient data resides on a Server outside the medical office. The staff accesses the patient data and performs all overhead functions using a web browser to connect to the Web Server. Like LAN based systems, web-based systems also lack the capability to transfer data to other independent medical practices. Another major drawback of the web-based system is that when Internet connection fails, the medical office staff is unable to perform its daily operations. Typically, the Internet Service Provider takes 1-2 days to restore the Internet connection, which can have adverse affect on the medical practice.
Web-Based Patient Records Systems
Recently, some companies have started to offer web-based services to patients where they can create, store and maintain their own health records. Physicians and other HC service providers can access and view/print the patient information through the Internet. Such systems do not have the basic capabilities to store and transfer Electronic Medical records (EMRs) created by the physicians.
Physicians Association Network Systems
Some healthcare Associations offer web based portals for the physicians and patients. These portals are primarily designed for patient education, and sometimes, allow the patients to electronically communicate with physicians. Some other services, such as Physicians Directory to find a new physician, are offered through such web-based networks. Such networks do not have any capabilities to allow physicians to create, store and transfer EMRs.
LAN-Web Combination Network Systems
A few larger vendors offer comprehensive medical office billing, accounting and management software (and hardware) packages that utilize both the LAN and web-based networks. Medical staff can access their office LAN from remote locations through the Internet, and patients are also given limited access using a web browser. These systems are designed for only one medical practice (including multiple locations of the same practice), and do not have capabilities to network with other independent medical practices.
EDI Network Systems
A number of Electronic Data Interchange (EDI) networks were introduced in the healthcare industry many years ago. Their primary objective was to submit medical claims to the insurance companies through a modem. Such networks have evolved, and now allow medical offices to send electronic claims through the Internet using a medical office billing software. These networks do not have any other networking capabilities.
Large Enterprise Network Systems
The main focus of all healthcare IT vendors is on larger HC service providers (hospitals, nursing homes, pharmacies, insurance companies etc.). These HC organizations need large IT systems for the whole enterprise, which costs millions of dollars. The IT vendors have enough financial incentives to focus on the upper-end of the HC industry, as compared to small medical practices. These enterprise systems are very sophisticated, and utilize all types of networks. Since these systems are designed for the internal use of the organization, real-time electronic communication and transfer of patient health information is restricted to physicians within the enterprise. However, some organizations do offer limited access to outside physicians and patients through the Internet.
Manual Network Systems
Majority of the medical practices in the country today are still using the manual network system for communication and transfer of patient information. Telephones, fax machines, e-mails, and postal mail is used for communication and transfer of HC information. Many times, patients personally carry their HC records from one HC provider to another. This manually operated network is responsible for high cost of the HC industry and poor quality of services to the patient.
National Health Information Infrastructure (NHII)
The initiative to create a national level health information infrastructure began in 2001 after the Anthrax terrorist activity in the US. This initiative was taken by the department of Health and Human Services (HSS), National Committee of Vitals and Health Statistics. The primary objectives of the NHII initiative were:                a) Every patient to have Personal Health records that are created and controlled by the individual or family. Such records be accessible to all HC service providers at any time from anywhere in the US.        b) To make all regional healthcare network systems within the US interoperable, and connect all networks together.        c) To make clinical data, individual health, and public health information available to all HC service providers and public health professionals in real-time for bioterrorism detection, disease prevention and healthcare research.        
The NHII concept was presented to president Bush by the department of HHS. The report submitted by the national committee did not give any details about the type of the network, or the technologies to be used to create the national level network. It simply recommended the federal government to take the roll of a leader, and start a private-public initiative to build the network.
National Health Information Network (NHIN)
President Bush and his staff followed the recommendations of the National Committee of Vitals and Health Statistics, and started the initiative for the national level network on Apr. 27, 2004, Under the leadership of Mr. David J. Brailer, the Information Technology Coordinator (appointed by secretary of HHS Mr. Tommy G. Thompson), the NHII evolved to NHIN. The additional emphasis was given to encourage all HC service providers to create Electronic Health Records (EHRs) nationwide. (EHRs is another name for EMRs—the name used to define patient health information created by physicians and lab technicians.)
The goals of NHII & NHIN initiatives are quite different, and do not even address the cost-quality problem of the US healthcare industry. Implementation of NHIN will, in fact, add millions of dollars to already rising cost of HC services. Since the existing methods of creating EMRs (EHRs) are not efficient, the on-going cost of the HC industry will also keep on rising.
Existing EMR Systems
(Prior Art)
For years, the information technology companies have been struggling with the problem of inefficient data entry by unskilled users. Those computer users who do not posses high-speed typing skills take a long time to enter data. Majority of physicians, today, do not have typing skills. The IT industry offers a number of solutions to the physicians for creating EMRs. However, the existing methods & EMR systems are expensive and inefficient, and therefore, majority of physicians have not adopted such EMR systems.
Dictation Systems
After examining a patient, instead of writing patient notes using paper and pen, the physician records the patient notes by speaking into a voice-recording device. His voice is digitized by the dictation system, and electronically transferred to a remote facility. A typist listens to the recorded voice, and types the patient notes into a computer. The text file is then electronically sent to the medical office, where it is proof read by the office manager, physician's assistance or the physician. Necessary corrections are made in the text, and final approved file is stored in physician's computer.
At present, the dictation system is the most commonly used EMR system in the HC industry, because it is inexpensive. However, the system has many drawbacks. It is not very efficient, and the error rate can be very high, especially if the typist cannot understand physician's accent. Proof reading and making corrections is a time consuming job, since the reader has to again listen to the recorded voice to make corrections. Integrating the text with the patient medical database is another manually performed operation. Because of these drawbacks, only a small fraction of physicians have adopted the dictation system in the country.
Voice Recognition Systems
IBM, Dragon Systems and a few other IT companies have been trying to develop voice recognition systems for over a decade. These systems have achieved some success understanding commonly used words in letter-writing etc., but in the healthcare industry, where medical terms are long and complex, the systems have not been successful. Training the voice system for each user can take up to 6 months, which further discourages the physicians to buy such systems.
Handwriting Recognition Systems
Recently, Microsoft and few other IT companies have developed handwriting recognition systems. But these systems face the same set of problems when applied in the HC industry. The physicians all over the world are known for having illegible handwriting. Therefore, the error rates of these systems are very high. With the result, they have not become popular, especially in the HC industry.
Template Based EMR Systems
Template based systems are the new wave of EMR systems in the HC industry for the last 5 years. Since the new HIPAA regulations are easy to meet if a medical office is paperless, more than 250 vendors are trying to market their products in the US. However, physicians have not welcomed these systems, as they are very expensive and inefficient. There is also a big learning curve upfront, especially if a physician is not computer literate. The template-based system is highly structured system, and forces the physician to follow a pre-defined path for recording patient notes. The physician does not have the freedom to write patient notes the way he wants. Thus, it takes him longer to complete a patient health record as compared to writing on paper. A physician will see fewer patients in a day if he uses a template based EMR system, which results in reduced revenue.
Currently, the healthcare industry in the United States is facing a very complex cost-quality problem. The P2P network system, as disclosed by the invention, is an integrated system that provides solutions to majority of the cost-quality problems.